Argentina’s economic labyrinth

March 20, 2020

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Credit: Arcadio Esquivel, Costa Rica

In an interview with local media outlet El Cohete a la Luna on January 12, Argentina’s President Alberto Fernández stated that he had given his government until March 31 to renegotiate the country’s public debt. With the government looking to restructure nearly $70 billion in debt to international bondholders, meeting the deadline will be a difficult task. More so now that global markets are taking a hit following the COVID-19 outbreak. In an interview with Reuters, Economy Minister Martín Guzmán said there may need to be flexibility given the global situation, but if the deadline were to be missed, it would only be by a matter of days. Although little is known about the proposal the government has for bondholders, Guzmán said Argentina “will not accept anything that is not sustainable.”

In a piece for Global Americans, Ignacio Labaqui of the Center for the Opening and Development of Latin America (CADAL) explains that there are four possible scenarios for how debt negotiations could play out. The first, and least likely, scenario sees Fernández successfully completing negotiations according to plan. In the second scenario, the government opts for a “take it or leave it” style negotiation, and if it fails to reach an agreement with bondholders, chooses to suspend payment of the debt under foreign law. The last two scenarios last beyond the March 31 deadline but have different outcomes: scenario three is a successful, but long, negotiation that results in delayed economic growth; but scenario four results in a gradual default, blocking the country’s access to global markets. As Labaqui puts it, no matter the scenario, there won’t be a neutral way to resolve the debt crisis.